January 13th, 2015 6:34 am
Via the WSJ:
Commodities
Oil Extends Selloff on UAE Minister’s Comments
By
Georgi Kantchev
Updated Jan. 13, 2015 6:25 a.m. ET
LONDON—The oil market extended its selloff Tuesday, coming close to six-year lows, after the United Arab Emirates’ oil minister said the Organization of the Petroleum Exporting Countries would stand firm on its decision to keep output unchanged.
The market shrugged off strong data out of China and pushed below the $45 a barrel mark for the U.S. oil benchmark. The oil slide rattled financial markets and knocked currencies world-wide.
Brent crude for February delivery fell more than 4% to $45.50 a barrel on London’s ICE exchange. On the New York Mercantile Exchange, light, sweet crude futures traded at $44.44 a barrel, down $1.60 from Monday’s settlement.
“We are still very much sentiment-driven and the sentiment will continue to be negative as long as there is no change in production,” said Thina M. Saltvedt, senior oil analyst at Nordea Bank Norge. “Oil is still piling up.”
Market participants estimate that the supply of crude is currently overshooting tepid demand for the commodity by as much as 2 million barrels a day.
That mismatch has driven prices off a cliff since last summer, with Brent falling to its lowest levels since March 2009. The oil price lost around 5% on Monday alone.
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Despite the rout, OPEC will maintain its decision to keep output unchanged, the United Arab Emirates’ oil minister said Tuesday. He said producers outside the group need to be rational and adjust their output according to the market.
“(OPEC) cannot continue protecting a certain price. That is not the only aim of OPEC,” Suhail Mohamed Faraj al-Mazrouei said at an energy event in Abu Dhabi organized by Gulf Intelligence.
OPEC, led by its largest producer Saudi Arabia, has long been the world’s most influential oil broker, adjusting its output levels to guide the world’s crude prices. But at its November 2014 meeting in Vienna, the cartel decided to keep production unchanged, exacerbating the selloff in oil markets.
On Tuesday, strong data out of China, the world’s second-largest oil consumer, failed to boost sentiment. In December, the country imported 13% more crude oil than a year earlier, topping a previous record set in January 2014.
“The lack of any reaction from the market to the Chinese data indicates that demand factors play no role at present and that supply is the dominant factor,” Commerzbank wrote in a note.
China imported 30.37 million metric tons of crude oil in December, equivalent to 7.2 million barrels a day, according to government data. China’s overall exports also rose by a faster-than-expected 9.7% on stronger overseas demand, a small bright spot in the country’s slowing economy.
“The China data was strong and you would’ve thought it would support the market,” Mrs. Saltvedt said. “But the market expects that China is just stocking up while the prices are low, just as it did during the financial crisis. This is a temporary development.”
The fallout from sliding oil prices continued to shake markets Tuesday, boosting government bonds and knocking currencies from the Russian ruble to the British pound. The recent plunge in energy prices helped drag U.K. consumer price inflation down to an annual rate of 0.5%, its slowest pace in more than a decade.
Later Tuesday, the U.S. Energy Department will publish its monthly oil market report and any major revisions to global oil demand or supply projections could move oil prices.
Nymex reformulated gasoline blendstock for February—the benchmark gasoline contract—fell 2.3% to $1.2463 a gallon, while ICE gasoil for February changed hands at $460.50 a metric ton, down $11 from Monday’s settlement.
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